Cisco Systems Inc. says it has turned the corner in getting service providers to adopt its biggest router.

Revenue from the CRS-1 (Carrier Routing System-1), the company's massive system for the core of carrier networks, was about US$80 million in Cisco's fiscal fourth quarter, President and Chief Executive Officer John Chambers said during a quarterly results conference call Tuesday. That figure was double the revenue from a year earlier. Meanwhile, Cisco received more than $100 million worth of orders for the product in the quarter, up more than 200 percent from a year earlier.

The CRS-1's numbers make up a small part of the whole financial picture at the San Jose, California, company, which reported revenue of $7.98 billion in the quarter ended July 29. But as its flagship product, the huge router is important to Cisco's image, as well as being a key weapon in its fight against rival Juniper Networks Inc. and the leading edge of a new software architecture destined for other Cisco products.

The product, unveiled in mid-2004, succeeded the Cisco 12000 Series platform as the company's biggest router. It can be equipped for a total capacity as great as 92T bps (bits per second) and has modular software called IOS (Internetwork Operating System) XR that is different from the IOS on most other Cisco gear. IOS XR is gradually trickling down to smaller Cisco products.

It's been a long trip, but products this big typically sell in relatively small numbers and have to go through long evaluations by the carriers. It has also taken time for Cisco to develop a full set of features in the new software, analysts said.

"It's a very complex product that's still in its infancy," said Frank Dzubeck, president of Communications Network Architects Inc., a consultancy in Washington, D.C.

But the growth Cisco reported Tuesday also reflects the recovery of a telecommunications business that has gone from a bewildering bandwidth glut and stock crash early in the decade to fast-growing demand.

"Video is becoming a killer app that really does require bandwidth," said Burton Group analyst Dave Passmore. New fiber-to-the-home networks, faster cable modem connections and 3G (third-generation) mobile systems also are increasing the need for capacity at the core of networks.

The pre-emptive multitasking architecture and modular software of the CRS-1 helped Cisco technology to catch up with Juniper, its rival in carrier routers, analysts said. Juniper's market share grew from 30 percent in 2002 to 37 percent in 2004 as Cisco's fell from 63 percent to 59 percent, according to Shin Umeda of Dell'Oro Group Inc. Since then the marketshare gap between the two companies has remained fairly stable, he said.

However, about two-thirds of Cisco's revenue from this class of routers still comes from the 12000 series, reflecting its big installed base, Umeda said. The battle for the top-end router deployments continues as many carriers plan out their next-generation architectures amid the growth in traffic.

Cisco has been an outsider to telecommunications and had a hard time breaking in to carrier accounts, but Chambers said Tuesday that they are starting to view Cisco as a business partner. That change reflects the fact that Cisco's IP (Internet Protocol) vision of networking finally is starting to supplant the traditional telephone networks as Cisco predicted in the 1990s, according to Passmore.

"Cisco firmly aligned itself with the ISPs (Internet service providers) and made enemies of all the traditional telcos," Passmore said. "The telcos finally did see the light and realized the future was IP."

IDG News Service

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